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Median house prices in Palmerston North for May rose 12.7 per cent compared to May 2013, according to the figures. But sales volumes for May fell 28 per cent in Palmerston North and Levin dropped 22 per cent compared to May 2013.

Real Estate Institute Manawatu spokesman Andy Stewart said there were fewer first-home buyers active in the marketplace and many had had to lower their expectations and were affected by the loan-to-value rules.

Loan-to-value ratio (LVR) is a measure of how much a bank lends against residential property, compared to the value of that property. The Reserve Bank has made it harder for banks to engage in higher-risk lending.

"There are a fewer investors in the marketplace but in saying that there have been a number of residential flats listed during May," Stewart said.

"There is still uncertainty and concern from vendors as to what is happening in the marketplace with the Reserve Bank's LVR policy."